British manufacturing activity slowed to a 21-month low in June, according to
the leading monthly survey, raising worries about the prospects for the
recovery's success story.

Weak demand at home coupled with cooling global demand meant new orders fell for a second month running, the Markit/CIPS UK Purchasing Managers’ Index (PMI) showed.

That helped the sector’s overall growth rate ease back for a fifth consecutive month, coming in at a reading of 51.3 – little over the 50-mark separating expansion from contraction and the weakest result since September 2009.

The average forecast from City economists had been that the index, which tracks the change in the sector's activity, would come in at 52.3, up from May’s revised reading of 52.

"This is a hugely disappointing survey which fuels currently mounting concerns over the economy,” said Howard Archer, UK economist at IHS Global Insight. “It is not just the fact that the headline figure showed overall manufacturing activity at a 21-month low in June but also that the more forward-looking elements of the survey point to further softness ahead.”

The sector, which accounts for just under 13pc of the UK’s gross domestic product (GDP), enjoyed robust growth following the recession on the back of recovering global demand and the impact of the weak pound, which made British exports more competitive.

However, in recent months there have been signs of a global slowdown in manufacturing, as companies ended their burst of restocking depleted inventories. The trend has also been exacerbated from the disruption to supply chains caused by the Japanese earthquake.

Researchers said that for the second quarter of 2011 as a whole, the PMI's average reading of 52.6 was the lowest since the sector’s recovery began in the autumn of 2009.

Looking ahead, Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said: "With spending cuts now kicking in it is clear that any support to growth from the domestic market is likely to be minimal, which leaves UK manufacturers exposed to events in the global economy where persistent weakening of activity indicators across Europe and Asia would start to raise alarm bells about the UK’s prospects."

The data supported expectations that the Bank of England will hold off from raising interest rates, because of the fragility of the UK's economic recovery. The pound dropped around 0.3pc against the dollar following the data, trading just over $1.60 as investors bet that no support would be forthcoming from a rate rise any time soon.

Composite PMIs for global manufacturing also reinforced the impression that factories around the world are losing steam. In China, the official PMI fell to a 28-month low of 50.9, indicating the sector only just kept growing, while Markit's eurozone manufacturing PMI fell to 52.0 in June, its lowest reading since December 2009.